Marathon Digital Holdings, Inc. (NASDAQ:MARA) Q3 2024 Earnings Call Transcript

Marathon Digital Holdings, Inc. (NASDAQ:MARA) Q3 2024 Earnings Call Transcript November 12, 2024

Operator: Greetings. Welcome to MARA’s Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Robert Samuels, Vice President of Investor Relations. Thank you. You may begin.

Robert Samuels: Thank you, operator. Good afternoon, and welcome to MARA’s third quarter 2024 earnings call. Thank you for joining us today. With me on today’s call are our Chairman and Chief Executive Officer, Fred Thiel; and our Chief Financial Officer, Salman Khan. Certain statements made during this call may be considered forward-looking statements within the meaning of the federal securities laws. In particular, any statements about our future growth plans and performance, our liquidity position, our growth opportunities, and our future financial performance are forward-looking statements. These statements are often identified by the use of words such as anticipate, believe, estimate, intend, design, may, plan, project, would, and similar expressions or variations.

Investors are cautioned not to place undue reliance on these forward-looking statements. All forward-looking statements made on today’s call involve risks and uncertainties. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Our actual results and outcomes may differ materially from those included in these forward-looking statements as a result of risk factors, including, but not limited to, the factors discussed under the heading Risk Factors in our most recent annual report on Form 10-K and any other periodic reports that we may file with the Securities and Exchange Commission. Finally, please note that on today’s call, we will refer to certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted EBITDA and non-GAAP total margin.

MARA believes these non-GAAP financial measures are important indicators of its operating performance because they exclude certain items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations. Please refer to the earnings release for a full reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures. We hope you’ve had the chance to read our new Shareholder Letter and look forward to your feedback. Today’s call will be a little bit different. We’ll begin with some brief prepared remarks from Fred and Salman. After their comments, we are going to be conducting an analyst interview with management. We are going to be doing this on a rotating basis, and our inaugural session will be conducted by Kevin Dede, analyst at H.C. Wainwright.

Once Kevin is finished, we will go through some of the more popular questions from our retail investors. And with that out of the way, I’m going to turn the call over to Fred to kick things off. Fred?

Q&A Session

Fred Thiel: Hello, everybody. Yesterday, we announced the addition of approximately 372 megawatts of owned and operated capacity across three sites in Ohio. These additions include the acquisition of two data centers, offering a combined 222 megawatts of interconnect-approved capacity, and the development of a third greenfield data center, which is expected to add another 150 megawatts of compute capacity. We acquired two operational data centers in Hannibal and Hopedale, Ohio with two, with 222 megawatts of combined capacity. These sites have 122 megawatts of current capacity and approved to expand by another 100 megawatts in 2025. Simultaneously, MARA has begun developing a 150-megawatt operation in Findlay, Ohio, which already has 30 megawatts of capacity.

These three facilities have a combined interconnect-approved capacity of 372 megawatts, which MARA intends to fully energize by the end of 2025. Compute for these sites is purchased, secured and ready for development — deployment. These data centers contribute to the resilience of MARA’s flexible compute portfolio. This initiative increases MARA’s exposure to PJM, one of the largest and most sophisticated independent system operators, or ISOs. Once energized, our data centers will be further diversified across multiple jurisdictions, ensuring that no single ISO contains more than 50% of our owned and operated capacity. We intend to further expand and diversify our portfolio of owned and operated sites, which we expect to yield significant cost savings.

These growth initiatives align with our strategic goal to position MARA as one of the most cost-effective and cost-efficient operators in the industry. And with that, I’ll hand it over to Salman.

Salman Khan: Thank you, Fred. Through our proven discipline and data center expertise, we acquired these assets at a multiple of approximately $270,000 per megawatt, based on improved capacity and after customary adjustments. This is one of the lowest disclosed multiples amongst our larger publicly-traded peers, which demonstrates our unmatched ability to deliver accretive acquisitions. As the largest best-capitalized company in our space, MARA has privilege of reviewing every potential M&A opportunity on the market. We have been at the table for every scalable transaction announced this year, and if those opportunities traded to our peers, it was because we passed on them. Our M&A track record reflects our discipline in organic growth and our focus on maximizing shareholder value.

Furthermore, these data centers will increase our total owned and operated compute capacity by over 70%. Owning the sites will provide us with greater operational control and could further reduce our operating costs at Hopedale data center, which is part of this acquisition, up to 50%. Much of the future capacity is alongside operating generation, power opportunity — providing opportunities for cost-reduction, power redundancy, and development optionality. I want to remind, in 2024 so far, MARA has secured approximately 1 gigawatt of nameplate capacity through acquisitions and greenfield site developments. As a result of strategic expansion, the company’s total nameplate capacity has increased to just under 1.5 gigawatts, with approximately 65% of this capacity proudly owned and operated by MARA.

With that, I will hand it back to Rob.

Robert Samuels: Thanks, Salman. Thanks, Fred. Now, I’m going to turn the call over to Kevin Dede from H.C. Wainwright to begin our interview. Kevin?

Q – Kevin Dede: Thanks, Rob. Hi, Fred, Salman, thanks so much for having me on. I think maybe Fred, it probably makes sense to start with the deal you just closed. Why don’t we talk a little bit about how you see it sort of folding into MARA’s overarching thesis in driving energy costs to near zero?

Fred Thiel: Sure. So, as you look at any acquisition we do, we’re focused on obviously lowering our cost of operations. These particular sites, one of which we had some capacity operating at, allow us to lower our cost of operating pretty significantly. Our goal over time, as we continue to grow our capacity, is to focus on sites where we’ll continually able to lower our cost to operate. So, by way of example, if you look at the on-site generation that we recently announced through our partnership with NGON, we’re able to generate electricity at a cost somewhere around $0.01 per kilowatt-hour, which is significantly lower than the typical market price of around $0.04 per kilowatt-hour paid for by miners using grid energy. And as we continue to expand those opportunities, and by the way, that type of stranded gas opportunity in gigawatt-hours measured is over 1 million gigawatt-hours per year of capacity, when you look at the overall market availability of gas.

And so, we believe that you’ll see miners like MARA go after these types of opportunities where we own and control our own power generation. And over time, MARA will be building more and more owned and operated generation capacity and find ways in partnering with AI companies, hyperscalers, providing services around energy management, which will allow us to subsidize our cost to operate as we co-locate with them. And I think over the next few quarters, you’ll see us expose a little bit more our plans in those areas, what we’re doing, the partnerships we have, and I think it will make it very clear what our vision is as we transition from a traditional mining company that has been predominantly dependent on third-party operators to a mining company that’s very focused on owning and operating its own resources and a mining company that really focuses on providing energy transition capabilities to companies way outside of mine.

Kevin Dede: Specific to the Ohio sites and their connection to PJM, what sort of flexibility do you have in your use of power and maybe an ability to resell it back to the grid?

Fred Thiel: PJM gives us the opportunity to leverage up. Power trading gives us the opportunity to leverage hedges, gives us the opportunity to do all the things that as a large load consumer, we would want to be able to do. And I think the benefits of what we’ve learned of how we can operate in Texas, now being able to operate with PJM being one of the largest ISOs in this space will give us a lot of flexibility in managing power costs. And as we continue to grow and expand our footprint there, it will be more and more powerful over time.

Kevin Dede: I know you mentioned the next couple of quarters is probably being more demonstrative of your zero power push, but if we took a look at the progress MARA made in the third quarter, are there any highlights that you could point to the multi-tentacle facet strategy that MARA has implemented that could point to a power reduction — power cost reduction?

Fred Thiel: Sure. I mean the NGON partnership is a very early first step, where you see us essentially going after micro data centers at the edge. And as I said, the opportunities there are very deep and very broad across oil and gas fields domestically as well as international. And the domestic opportunities themselves are huge. And we believe we now have a core competency in being able to do this and execute it at scale. And as we continue to grow, it’ll become a bigger and bigger portion of our fleet and owned and operated data centers.

Kevin Dede: Okay. Let’s switch gears a little bit and talk about — I think it’s almost 27,000 Bitcoin MARA holds at this point. Can you talk a little to your HODL strategy? And how MARA — how it views it as an adjunct to building the company’s presence where MARA might be able to take it, what sort of financial implementation might drive greater yield on it? Maybe a little more insight on how you see your HODL strategy?

Fred Thiel: Sure. So, I think one way to look at it is, we have purchased roughly 6,400 BTC at an average cost of around $60,000 per BTC. And you think about the convert transaction we did in late August, where we purchased a little over 4,000 Bitcoin that transaction has netted a huge IRR to our shareholders over a very short period of time because of where the price of Bitcoin is today. And if you recall, at the time, we said the reason we are — we go into the market and opportunistically buy Bitcoin is because we believe that there will be a price inflection point where it is of huge value to our shareholders for us to go buy Bitcoin versus investing assets into building mining capacity, which won’t generate Bitcoin for potentially 12 to 18 months.

And so, here is a very good proof point of that strategy playing out very positively for our shareholders and for Marathon. If you look over the multiple purchases of Bitcoin we’ve done over the years, it has netted a very healthy return for our shareholders. And we believe that we will continue to execute a strategy of a hybrid of buying Bitcoin when it makes sense and mining Bitcoin when it makes sense. Our average cost of the Bitcoin in our HODL today is somewhere under $50,000 when you average our cost to mine of the Bitcoin that we’ve mined in our treasury and the Bitcoin that we have acquired. And so, if you look at that compared to today’s price of Bitcoin, it’s a very significant appreciation in value. And today, I think we hold a little over $2.2 billion…

Salman Khan: Almost $2.5 billion.

Fred Thiel: Almost $2.5 billion in Bitcoin in the balance sheet. And now, to the latter part of your question, so what do you do with that Bitcoin? While there are ways to generate yield on that Bitcoin, such that we can generate income from it and that income can generate either cash to buy more Bitcoin, cash to subsidized SG&A expenses, cash to lower power costs, cash to equipment purchases. So, it gives us financial flexibility. We can also collateralize it and borrow against it. It gives us a lot of options, and having one of — amongst one of the strongest balance sheets in the industry, we believe we are very well-positioned for whatever the market brings. At the current moment in the marketplace, with this current jump in the price of Bitcoin, we believe the period of low-cost growth is likely coming to an end.

And companies will now be forced to compete for capacity in a very different way than they have in the past and growth will become more and more expensive and the smaller miners will become more and more challenged, which will make consolidation a more attractive option. However, we are not in the business of going out and paying $1.6 million a megawatt for capacity like some of our peers have done. Look at this transaction, $277,000 a megawatt, almost half of what we paid at the beginning of this year for the other assets that we acquired. We are going to be very smart. We have taken advantage of the pricing of machines and order more machines than we needed for our 50 exahash goal such that we would be ready for the growth spurts that come next year.

And we believe the market next year will be capacity-constrained for some miners, and those of us who have planned in advance, who have machines in inventory on order and optioned at attractive prices and have the ability to build their own miners, there are very few of our peers who are able to build their own miners and have access to chip supplies for it, will be the ones that over the next years leading into the next halving will dominate this marketplace. And we think between our tech stack, our ability to build custom miners, our 2PIC immersion technology, which lets us run miners at significant levels of overclock and optimize our use of energy together with our focus on near-zero cost energy will make us the predominant miner in this industry from a cost perspective.

Kevin Dede: So, Fred, apart from an opportunistic approach, how should we think about MARA’s priority and capital use between Bitcoin, on the balance sheet, acquisition of sites, deployment of more mining machines, partnerships with potential companies to reuse heat and the assorted other opportunities you have, not to mention software development?

Fred Thiel: Kevin, very big question, almost more for an Analyst Day type of fireside chat than we have time for today, but you can think of it this way. We have a very well-defined plan for organic expansion that combines a focus on owned and operated energy, owned and operated data centers and collaboration with large-scale AI hyperscalers. We have a very well-defined plan around our technology stack and how we’re going to deploy it. You’ll see next generations of our 2PIC miners focus specifically for AI, also combined functionality, AI and mining. You’ll see different form factors of those specifically designed for edge inference locations, where we’ll be able to essentially operate anything from 4U up to 48U in a single two-phase immersion container.

And these systems will continue to get more and more efficient, and more and more able to leverage the ever-increasing power and heat densities that come from the AI world. And as we move up the stack towards our pool and software systems for energy balancing, I think you’ll continue to see over the next year to two years a series of announcements which start positioning MARA as one of the leading solutions providers in the area of essentially optimizing idle electrons, no matter where they stand.

Kevin Dede: The Ohio deal is very compelling, Fred. Was there any sort of special negotiation sort of behind the scenes that were you able to elicit such favorable terms? And how much more supply at that rate do you think exists in North America, given huge demand for HPC and AI?

Fred Thiel: Well, I think it comes down to some sites are suitable for AI and HPC and some sites aren’t. It’s like that old commercial. Sometimes you think like a nut, and sometimes you don’t. And there are sites that really only are good suited for Bitcoin mining because they have a load that has to be curtailed, they don’t have access to high-speed internet connection or fiber connectivity, or there are lots of other reasons. And so, we believe that if you look at the multitude of Bitcoin mining sites that have been built over the years and the amount of projects for power, there are lots of low-hanging fruit in this type of price range. The challenge is scale, right? MARA is of a scale today where we’re not interested in 20, 30, 40, 50 megawatt sites.

Our focus is on the 100-megawatt and larger scale, especially around what we call utility-scale mining. For the on-site generation, we’re very focused on micro data centers because, A, we have the technology to do it because of our immersion technology and our container technology and software, our ability to deploy miners that are very fault tolerant and can operate without human assistance, and the fact that we can generate our own energy, which means our overall cost to operate is very, very low. And then, as we look more towards the future, ultra-high scale or what I would call hyperscale comes from relationships with hyperscalers, where there is a very symbiotic relationship to be had between Bitcoin miners and large loads in the AI HPC space.

And I think what you’ll continue to see is MARA scaling from power all the way through to energy management, fully across that spectrum, across a variety of solutions.

Kevin Dede: So, you’ve mentioned 2PIC a couple of times, Fred. I know that the letter referred to some tanks that you intend to shift and ship in Q4. I’m wondering, aside from the ones that you had running in test facility, what you might be able to say about them and how you geared up production. I know the letter alluded to a order rate like a third-party order already. How are you allocating resources to meet that demand as well as upgrading some of your own sites?

Fred Thiel: Sure. So, we are blessed with the fact that we have one very large customer called MARA, who is a very nice customer, but they’re a hard negotiator on price. And then, we have third-party miners and data center operators who are very interested in the technology. And so have been willing to place orders with us to test technology and see its applicability in deploying across their systems. And so, those systems being shipped. I think nearly 40 systems between what MARA is using and third-parties will be delivered by the end of this year and installed. We are currently operating 2PIC in production, not just in test, and getting some very good results. I mean, in some cases, we’re seeing overclock well over 20% in systems very efficiently and getting very good results.

The additional advantage of 2PIC is there’s a very low PUE, which means the mechanical load for cooling is very, very low. So, the overall power draw of the facility comes down, which means you now have even more energy that you can apply to mining Bitcoin. And so, the initial results seem very attractive and we’ll continue to ramp production at the same time as we’re iterating the design. We have gone from the 2PIC solution that was designed specifically for Bitcoin miners moving towards a 2PIC solution that is designed for a hybrid application of a mix in the same tank, of miners and AI rigs to a 2PIC solution that allows for hot-swap ability of AI rigs or miners, in multiple form factors from large-scale deployment all the way down to micro data centers.

And what we’re seeing is a very significant amount of interest in people looking to test this and see how it works. Two-phase immersion is still a new technology, right? Two-phase technology is something that not all systems can just be dropped in and operated in. And so, we’re working with OEMs to make sure that the systems that they manufacture work appropriately. MARA has built and designed its own custom miners for 2PIC which are ultra-high density such that we can operate in what would normally be a 300 kind of kilowatt implementation over a megawatt of miners in a single 2PIC tank. And we’re seeing really good results of that. So, we will continue to be more and more vertically integrated in what we do and become less and less dependent on supply chains from offshore manufacturers, providing technology that is really designed for the average Bitcoin miner as opposed to a highly optimized, highly integrated miner like ourselves.

Kevin Dede: The miners themselves you referenced here, Fred, are they the result of the work that you’ve done with Auradine? And if you wouldn’t mind commenting, maybe you could give us a little insight on how you see wafer source given hubbub of the — and controversy surrounding Bitmain and its AI partner at TSMC?

Fred Thiel: So, in regards to Auradine, obviously, yes, we’re using Auradine miners, both their standard miners as well as down at the silicon level and optimizing for our own applications. That being said, we have designed our 2PIC miner unit to be able to use hashboards from third-party providers as well. And this is not a product we’re looking to sell to anybody. This is a product we’re keeping for ourselves. Sorry to be selfish, but the advantages of the power densities and what we do in these systems is such that we believe it’s better that we use it for our own purposes. That being said, we have optional — optimal flexibility in that we can use Auradine chips. We can use Auradine hashboards, we can use third-party hashboards in these devices, which we then modify for our specific use case.

As you look at wafers, 3-nanometer wafers are in short supply because of what’s going on in the GPU space. However, we have not seen any indication from TSMC that Bitmain’s supplier access to wafers has been impacted. We are seeing that certainly, Auradine has ample access to wafers and is getting all the supply that they need. As we look at next-generation technologies, I think you won’t see 2-nanometer appear on the marketplace, most probably for closer to three years. And I think what you’re going to see before that is a reengineering of how miners actually look and operate, such that the geometry will be much less important than how the hashboard is designed such that you could even take 7-nanometer chips run them at lower power and higher frequency and get the energy efficiency of much more expensive 3-nanometer parts and not have any of the supply chain constraints.

And so, I think you’re going to see a lot of innovation around miner technology by third parties, and this market is going to really start becoming very exciting relative to the options that miners are going to have, which will mean less control from the hardware vendors as times roll on.

Kevin Dede: Well, that’s long overdue. Happy to hear that supply — wafer supply isn’t constrained. So, the shareholder letter made it explicitly clear that MARA harbors no ambition to run AI sites. You have two new Board members that have great experience in both data centers and energy. I guess, what I’m curious to hear your perspective on is how you might be able to capitalize on that experience and incorporate their consultation and input in MARA’s day-to-day operation?

Fred Thiel: Kevin, I’m obviously not going to share our five-year strategic plan with you on the phone right now. I’m sure there…

Kevin Dede: Maybe next quarter?

Fred Thiel: Yeah, I’m sure that our friends in CleanSpark and Riot would love for us to do that, but we’re not going to do that today. What I will share is that if you look at the hosting business or the GPU as a rental service business, H100 rental prices have dropped by 75% in the last six months. If you think that the technology obsolescence of Bitcoin mining is aggressive, welcome to the world of GPUs. It is even more aggressive. Anybody who comes from the Bitcoin mining side, who is excited about going into the hyperscaler or large-scale data center for AI HPC hosting business is in for what I believe will be an abrupt surprise come two or three years when the hyperscalers deployments of the data centers they have in production today start coming online and there is no way for third-party independent providers to compete on price or capability or functionality.

The hyperscalers will have the first choice of hardware, the hyperscalers will have the first choice of power and the hyperscalers will have the first choice of customers. And so, I think companies that are able to tie-up agreements in the very short-term today as long as those agreements — those hosting agreements can be enforced in the customers that are behind them are able to pay over the long-term, I think they’re lucky and I congratulate them. I think anybody else trying to go into this business today is looking at a race to the bottom from a cost perspective and a very challenging capital market, once people wake up to the fact of how difficult it really is to run an AI HPC hosting business when you’re not a hyperscaler yourself. So, not to take up more time in this.

But think of it, we are a technology company. We are a company that is focused on bringing to market high-value solutions that will generate a great return for our shareholders. We are not chasing the next hype trend. We’re not chasing the next fab. We’re focused on delivering true value to the marketplace. And I think if you look at the team we have built and continue to build, we look at what we’re doing in adding talent and knowledge to our Board, you can start getting an idea for the direction of the types of technologies that MARA will begin to continue to bring to market and the solutions that we plan to bring to market that will position us very differently from anybody who looks at us as just a Bitcoin miner.

Kevin Dede: Fair enough, Fred. Thanks. We’d be remiss if we weren’t to discuss the events last week and the subsequent reflection in Bitcoin price. I’m not one to opine on politics at all, but I’m certainly curious to your perspective. I definitely warrant some discussion. The [MARA] (ph) letter made it pretty clear that you folks have been involved in the process. I guess, I’m wondering whether or not you think that continues, how you see the changes anticipated and reflected in the industry going forward. I mean, aside from perhaps Mr. Gensler losing his job, what else are you looking forward to as US government moves toward a more crypto-friendly stance? And how do you see MARA taking advantage of it?

Fred Thiel: Absolutely. Well, I think, one of the great advantages of the United States form of government is that we have three branches of government. What I’ll focus my comments on are the legislative and the executive branch. If you look at the results of this election, 200 members of the House of Representatives and close to 18 Senators are joining the legislative branch who are all pro-crypto. The crypto industry spent over $100 million in targeted campaigns and MARA, together with two other of our peers, co-founded the Bitcoin Voter Project, which specifically targeted campaigns and individuals who felt crypto was important and got them to go out and vote for candidates that were pro-crypto. The most significant race of which was the Sherrod Brown-Bernie Moreno race where the crypto activists were able to unseat Sherrod Brown, one of Elizabeth Warren’s collaborators, in trying to drive the anti-crypto army.

So, we believe the legislative branch will have a much more open perspective on crypto, and we fully expect the Republican a majority in the Senate. And we’ll see how the House turns out to put forth legislation that we believe President Trump will sign that provides for market structure, provides for stablecoins, and provides for a regulatory regime for Bitcoin and crypto that will enable banks to custody and collateralize crypto and Bitcoin assets, and you’ll see other forms of ETFs and other types of securities come to market that will provide institutional investors with a plethora of options so that they can take advantage of Bitcoin and other crypto assets as investment instruments. In regards to the executive branch, if you look at the two campaigns, it was quite obvious from Vice President Harris’ comments, that I believe it was on The View, when asked, what are you going to do differently, if anything, to President Biden, and the Vice President answered that she would do nothing different.

That was a clear indication that the war on crypto was going to continue. And it was a clear indication that the Bitcoin mining community needed to rally around the Republican cause. President-elect Trump clearly stated at the Nashville Conference, not only his support for Bitcoin but his belief in Bitcoin as being something that should be mined in the US and that the US should hold the strategic reserve of such that they could project power within crypto markets and specifically in the use of Bitcoin as this international trade settlement asset and hold a strategic significant amount of Bitcoin, similar to how the US government holds gold. Now, Senator Lummis has put forth a bill specifically to establish a strategic reserve in the belief of two things.

One is the ability to project power, but more importantly, if Bitcoin continues to appreciate as it has, and the past weeks are a great example of how it can, then a significant amount of Bitcoin held by the US government could be used as an offset to the federal debt. The only other alternative to paying that debt is to allow inflation to run wild and inflate down the debt, which is not something I want my children or grandchildren to have to experience. And so, I know I personally will do anything to support government initiatives that promote the ease and use of Bitcoin as an investment asset and provide tax legislation around allowing Bitcoin to be used for transactions and not have those transactions be taxed, allow miners to operate freely and have equal access to power in the US without being targeted.

And allow more and more Bitcoin to be mined in the US such that the US is able to ensure that it has a significant amount of block space to protect the freedom of transactions in Bitcoin regardless of use application as long as it’s lawful, within the US, and by people investing in the US.

Kevin Dede: I’m going to switch over to Salman for my last question. Salman, taking a step back and looking at MARA’s overall financial performance, what do you see as the highlights? What worked well as well as you had hoped? And where do you think you’ll need to move to improve performance? And what do you think we could expect to see going forward?

Salman Khan: Thank you, Kevin, for the question. As we’ve reported today, our energized hash rate has increased 93% to 36.9 exahash per second in the Q3 of this year versus Q3 of last year. And as you know, in this sector, our production is public information after quarter-end as well. So, we have hit more than 40 exahash already and we are driving towards the 50 exahash target that we had set for ourselves that was revised middle of the year this year. Now, in terms of total block space, another great highlight for us, despite halving, we were 32% higher compared to Q2 of 2024. And that’s a significant increase quarter over — from a sequential quarter standpoint. In addition to that, obviously, that impacts our revenues. Our revenues increased 35% compared to the same quarter of last year.

There’s an impact on Bitcoin price and there’s an impact of halving, and then there is an impact of global hash rate. As we all know, global hash rate has gone up considerably over this period of time. As a result of that, difficulty level has gone up considerably. Despite all those challenges, we have persevered, and our revenues have gone up considerably compared to last year at the same time. On the cost side, it’s a similar story. Our cost of revenue, as we measure from a cost per petahash per day perspective, that’s a KPI that we have set for ourselves, it has improved consistently throughout this year. And one of the reasons is the acquisitions, the accretive acquisitions that we did, those are driving our costs down, but also in addition to that is the organic growth.

The additional capacity that our teams have successfully deployed that we are very proud of, that has consistently resulted in decline of our cost of revenue. So, if you look at cash cost of revenue, as we call it, without depreciation, that has gone down. And a reminder, that’s a non-GAAP measure as we disclosed in our financials and in our Shareholder Letter as well. It has gone down 18% from $45.2 in the third quarter of 2023 to $37.1 per petahash per day in the third quarter of 2024. And that’s a testament of our strategy of driving towards a near-zero energy cost. But as you know that we were a asset-light company a year-ago, just a year ago. And with the gigawatt addition in capacity approximately once it’s fully energized, through acquisitions and organic growth, those acquisitions will reap benefits over a period of time and we’re starting to see those benefits.

Sequentially, quarter-over-quarter, we continue to reduce our costs. So, if you look at sequential quarter from Q2 to Q3, it’s a 10% reduction with the same KPI that we just talked about. And then, on the balance sheet side, obviously, we — as Fred mentioned already, we have over 27,000 Bitcoin at this stage post-quarter-end. And the value of that is — obviously, it has gone up considerably as anticipated. With the transaction, I want to touch a little bit more on the convert transaction that we did. And we have access to multiple sources of capital, Kevin, at this stage, which is encouraging. Yet, it is a little bit premature in this industry as we evolve as an industry and as we become more mainstream per se from a banking and financial services perspective, we expect to see more sources of capital open up to the sector.

Having said that, the decision to buy Bitcoin on top of producing Bitcoin was highly accretive for us. Just looking at the 6,400 — over 6,400 Bitcoin that we purchased this year at an average price of $60,000 per bitcoin, that has resulted in — as of today, it has resulted in approximately 50% increase in our BTC yield per share. And remember, this per share calculation is based on assumed diluted share calculation based on our best estimate at this stage. So, in terms of value creation and value driver, that purchase is a great example, and that with a convertible debt, it made a lot of sense for us to execute that we did in August. Now, going back to combined restricted cash and BTC, our balance sheet continues to be extremely strong, one of the strongest in this sector, with the Bitcoin that we hold on the balance sheet.

And from a long-term perspective, the whole Bitcoin holding strategy is already paying off when you look at these rates of returns. Now, a quick reminder, Bitcoin price is a commodity price. We don’t control it. It fluctuates, and investors should expect that it will fluctuate over a period of time, but with the amount of HODL that we have, the second-largest worldwide as a public company space, that we believe is going to create significantly more value than it has already created for us at this stage.

Kevin Dede: Thanks, Salman. And thanks for the detail on the mining cost per petahash. I think it was 37. I imagine we’ll see that decline again through the fourth quarter as the Ohio sites come online. Thank you very much for entertaining my questions, gentlemen. I really appreciate it. And Fred, thanks for digesting the questions and offering a shorter answer than you may have wanted to otherwise. I appreciate that. I’ll turn the call back to Rob. Thanks again for having me on.

Fred Thiel: Thank you.

Robert Samuels: Thanks, Kevin. We really appreciate all the questions. We did, as usual, we did take some — get some questions from our retail investors. Most of them hit on some of the similar questions that you were asking, Kevin. There is one thing that people are asking and I just would like to address to Fred is how involved Fred do you think us — how involved do you expect us to be MARA to be in the shaping of US Bitcoin and Bitcoin mining/energy policy with the incoming administration?

Fred Thiel: I think members of the incoming administration have been engaging with the Bitcoin miners regarding early thoughts on a variety of policies and we’ll continue to advise and consult and provide our input when asked. We’re obviously going to take as active a role as is appropriate. But we’re very focused on working with all branches of government, whether it be the executive branch, the legislative branch, or even the department such as FERC, DOE, and others, such that the broader government, civil servants, the parts of the government that run and operate independent of elected or appointed officials become educated into the benefits of how Bitcoin mining in our industry can benefit the energy grid and the deployment and transition of energy to a more electrified nation.

This country is going to have to spend trillions of dollars to upgrade its grid as it continues to deploy more renewable and intermittent energy generation. And until we have a more broadly — broad acceptance for further nuclear energy in this country, all renewable energy will be intermittent in nature, which means you need the ability to load balance and you need dispatchable load. And that is something that Bitcoin mining is uniquely positioned to do. And that’s something we’re going to be working with all government departments to try and get them to realize the benefits such that as they plan and build out the grid, considerations for large dispatchable loads of Bitcoin mining are taken into account.

Robert Samuels: Thanks, Fred, and thanks, Salman, and thank you everyone for your time today. If you have questions that were not answered during today’s call, please feel free to contact our Investor Relations team at ir@mara.com. Thanks very much, and enjoy the rest of the day.

Operator: Thank you. All parties may disconnect.